Ceramic Tile Report – April 2014

Last year marked another strong period of growth in the ceramic market. Though the tile industry has seen steady increases since 2010, several of the manufacturers with whom we spoke reported that 2013 seemed to mark a change. Thomas Smith, president of Cooperativa Ceramica d’Imola North America, contends that “2013 was the year when the market started loosening up, the year where things started feeling busy again, so we expect 2014 to be a very good year, a year when things are back to better. This is an opportunity to invest.”

In the March issue, we reported that hardwood was the fastest growing flooring category in 2013. As more numbers have been released, the year-end figures have been revised. Actually, ceramic floor tile eked out a bit of a lead with 16.9% year-over-year growth, and hardwood came in with 16.6% growth, according to Santo Torcivia of Market Insights LLC. Ceramic’s total sales for the year were $2.673 billion. By square footage, the ceramic category saw 14% growth for a total of 2.387 billion square feet.

One reason that it’s hard to track floor tile numbers is that so much of the market is imported. Torcivia estimates that in 2012 60% of all U.S. ceramic tile consumption (in dollars) was imports. Imports were up 1.2% through the first three quarters of last year, according to the Tile Council of North America. By square footage, Mexico, China, Italy, Spain and Brazil were the top five importers to the U.S. market. However, by dollar value, Mexico and Italy swap spots on the list, as much of the tile shipped from Mexico is low cost product. Interestingly, China increased its exports to the U.S. by 23.3% and, in 2013, was trailing Mexico by only 1.3 million square feet.

All the while, manufacturers have been making investments in U.S. manufacturing. Texas leads the country in ceramic tile manufacturing; Dal-Tile currently has four manufacturing locations in Texas, and Interceramic has one. In addition, Tennessee has been gaining plants at a rapid rate. In fact, Dal-Tile recently announced its intent to build a new 1.4 million square foot manufacturing plant and distribution center in Dickson, Tennessee. This plant joins Crossville, Del Conca (opened February 2014), Florim and GranitiFiandre (StonePeak) in the state. In total, Texas accounts for 40% of U.S. tile production, and Tennessee accounts for about 15%.

STAYING AHEAD ON STYLE

Stefano Rabaioli, vice president of sales and marketing for Florim USA, says that an estimated 30% of today’s market is wood looks, according to his sources; however, he doesn’t believe that the market is yet saturated with wood visuals. His competitors agree with him. While nearly every manufacturer expressed concern about market saturation, almost all said, in the next breath, that they were rolling out more wood looks. Of course, the key is staying atop trends and creating looks with differentiation. Instead of simply recreating popular hardwoods, manufacturers are adding weathered and exotic looks to their line-ups. In addition, manufacturers continually update their hardwood visuals as technology makes it possible for them to increase realism. Porcelanosa, for instance, is currently working on its collection of fourth-generation wood-look tiles.

Sean Cilona, director of marketing for Florida Tile, reports, “Wood looks have essentially created their own product category. At some point, we will hit a threshold, with every manufacturer introducing so much and then everyone will cut back, but customers are always going to want wood looks. The American market still prefers the replication of natural materials, and wood-look tile offers that look but with all the benefits of porcelain.”

But staying ahead on style isn’t about using cutting edge technology to create the best copy. Says Enzo Mularoni, president of Del Conca, “Digital printing is a tool, and you can’t only use it to make copies. Everyone can make copies. And copies will always be copies. People want something original, something different.”

Imola’s Smith agrees, “Digital technology has been around for a long time. It’s how you use it to gain the advantage. How do you develop digital printing to enhance the looks you’re already doing? If you’re just duplicating looks, a lot of people can do that. How do you separate yourself? It’s by creating blended looks, looks that show the hand of man. If you’re only duplicating looks, you’ll be beat by China.”

To that end, here and there the market is generating products impossible in nature, like a single tile with both stone and wood characteristics or a textile look paired with a concrete visual. These products reveal the work of the designer and require that manufacturers have a team of truly creative thinkers pushing the design beyond recreating marbles and travertines.

SIZES & SHAPES

The standard formats of the ceramic tile market have shifted. No longer are 12”x12” tiles the go-to for American consumers. According to Mularoni, 24”x24” are the bread-and-butter product, and it’s moving quickly toward larger sizes like 32”x32”. Imola has a 48”x48” tile on the market. The first production line dedicated to the product sold out, and the company has now introduced a second line to produce the large product.

At the same time, we’ve seen a change in shape. Squares were long the standard, but today rectangles are often the desired format. Bob Balducchi, director of sales and marketing at Emser, estimates that just a few years ago 80% to 90% of his business was square tile. Today, that number is around 65%, as rectangular and plank formats have taken share.

Says Cilona, “Rectangular shapes have been growing consistently; 12”x12” used to be the standard. Today we have 12”x24” and 18”x36”.” Del Conca, Imola and others offer a 48” plank.

This transition toward larger sizes hasn’t been painless. Says Balducchi, “The larger formats are creating a catch-up factor with the installation community, and the migration of business to planks caught the industry by surprise on the technical side.” These same sorts of challenges have come along with the trend toward thin tile as well.

Says Cilona, “Thin tile is a dominating factor in Europe, and it’s coming to the U.S. I think Coverings may mark the time when we stop only talking about thin tile and start to see it hit the market.”

Balducchi, too, believes that the thin tile market hasn’t fully emerged, “There is a market for thin tile, but I haven’t seen it too much. It is viable, but I haven’t see it pull through as all the hype a few years ago indicated that it would.”

Crossville, in collaboration with Laminam, has introduced a large format thin tile product for floor use. This 5.6mm thick product is 3m x 1m and is suitable for use on interior floors.

At the other side of the spectrum are the new thick tiles for outdoor use. Both Imola and Del Conca USA are introducing these tiles, which can be installed via a raised system or simply laid on a gravel or sand surface. Del Conca has seen a growing interest in these products in Europe and expects that interest to move to the U.S. market. Currently, the company has one kiln dedicated to the manufacture of thick tiles. The products, which boast both anti-slip and anti-staining properties, are used in the same applications as brick pavers.

MARKET PLAYERS

Florim USA is owned by the Italian firm Florim Ceramiche, one of the world’s largest ceramic tile producers. Florim USA manufactures 100% of its domestically sold product in Clarksville, Tennessee. In 2013, Florim completed a major renovation of its factory. It added new presses with the goal of increasing capacity to support larger sizes. Florim now has the ability to manufacture sizes up to 6”x48” and 24”x48” and will be rolling out products in these formats for both the residential and commercial markets this year.

Florim USA sells through distribution, home centers and A&D. The company first began shifting business toward the commercial sector four years ago and has been doing well in that side of the market. Its products were recently specified for the Tampa International Airport as well as several Hyatt hotels.

When Florim began using digital printing, it was utilizing a four-head printer; today, it is employing an eight-head printer, which yields improved definition and speed. The company reports that the eight-head printer has more sophisticated inks that are more fluid and don’t clog or create lines.

Porcelanosa is a family owned company with 5,000 employees worldwide; the company manufactures all of its products in Spain. Porcelanosa recently purchased a six-story building on Madison Square Park in Manhattan and is currently renovating the space to serve as a showroom; one floor will function as office space. The location is expected to open by the end of the year. The company also opened two new retail locations last year, one in Colorado and one in Pennsylvania.

Porcelanosa terms itself a vertically integrated manufacturer because it creates, distributes and retails its products; its goal is to be as close to the end user as possible. The company serves every channel of the market and has dedicated sales teams to service the A&D and hospitality sectors. In total, about 40% of its business is commercial; 40% to 45% is sold through its privately owned retail locations; and the rest of the business goes through distribution.

Porcelanosa has not pursued Green Squared certification, though it believes that it meets all the requirements for the certification. Ultimately, the company is waiting for an increase in demand from the A&D community before it goes after the accreditation. Porcelanosa manufactures a product that contains 95% post-industrial recycled content and reports that its manufacturing processes are so efficient that it is running out of waste material.

Porcelanosa has also stayed at the forefront of the large and thin tile trends with its X-Light collection that is 118”x39” and 1/8” thick.

Imola is an Italian cooperative that manufacturers 100% of its products in Italy. Currently, it is working on an expansion of logistics and service to better compete with domestic manufacturers. In March, the company opened a new warehouse in Indianapolis, Indiana to increase its speed to market. Smith explains why the company chose Indianapolis: “Six hundred miles is one-and-a-half day’s trucking. We can hit a big chunk of North America in that radius.” The company has another warehouse in Miami, Florida. Imola is also expanding its national accounts team.

Imola utilizes Sacmi’s Continua technology in the manufacturing process. Continua allows the company to manufacture a continuous belt of tile, a nine linear feet pour of raw material. From that belt, the company can cut any tile size that it wants. The resulting product is rectified and very flat. In addition, the process is very efficient, running continuously. The company’s first Continua press went online in 2012. By 2013, that line was sold out; Imola now has a second Continua line up and running. Each line requires a $23 million investment.

The bulk of Imola’s business is through independent distribution. For the last three years, the company has been focusing on commercial sales as well, which, it reports, is a completely different business from residential. Says Smith, “The products have to be contemporary and the colors accurate. The A&D client wants color accuracy. There are lots of sources for average.”

Emser differs from the rest of the companies in our roundup because it doesn’t manufacture any of the product that it sells. Instead, the company sources tile and stone products from around the world, and the firm notes that the global marketplace is opening up post-recession and that emerging markets are reinvesting in ceramic tile production now that the economy is improving.

Emser sells both ceramic and stone products (a total of 4,500 SKUs) through its 57 service centers, which are meant to act as an extension of their customer’s space. The showrooms include an attached warehouse and design studio. These service centers are typically located in industrial park type areas, where tradesman frequently pick up materials. This model gives Emser a strong presence in local markets and means that the company doesn’t have to ship from a central distribution point, cutting down on wait time for customers. Emser reaches the commercial market via two teams of reps; reps from the salesman service centers call on local accounts, and a team of national reps calls on national accounts.

Del Conca USA is the American arm of the Italian firm Del Conca. Del Conca USA opened its first U.S. manufacturing facility in Loudon, Tennessee in mid-February. The $50 million dollar plant—$30 million of which went to purchasing Italian-made technology—will manufacture different products from what it makes it Italy and an abbreviated number of sizes. The Italian factory creates about 15 different sizes, while the U.S. factory will start with four. Del Conca’s Italian manufacturing exports about 75% of its production, in line with other Italian producers. The U.S. is the fastest growing market for the firm.

Del Conca is launching its new Fast locking tile system in the U.S. market. The system streamlines the installation process with a technology similar to that used on laminate and engineered hardwood. The flooring can also be disassembled and reassembled in another location. Besides cutting installation time substantially and eliminating much of the mess associated with ceramic tile installation, the system also enables users to install a tile floor without damaging the surface beneath it. Fast is made in Italy.

Del Conca sells through ceramic tile distributors and to home centers; each channel has its own product line. The company isn’t very active in the U.S. commercial market currently but intends to manufacture products catering to that market in the new Tennessee facility. For more on Del Conca USA’s business, turn to Kemp’s interview with Enzo Mularoni in this month’s Focus on Leadership, starting on page 15.

Dal-Tile, owned by Mohawk, is the parent company of the Daltile, American Olean, Ragno and Marazzi brands. The acquisition of Marazzi was made just last April. Pre-acquisition, Dal-Tile and Marazzi were the two largest players in the U.S. ceramic tile market, so their union created a powerhouse, with combined estimated sales for 2012 of $920 million. Full integration of Marazzi into the Dal-Tile family was completed in October 2013, and, since then, the company has been determining how it can best utilize its new resources to benefit all of the brands. The acquisition allowed Dal-Tile to gain access to Marazzi’s manufacturing facilities in Sunnyvale, Texas; Florence, Alabama; and Europe. Marazzi receives little imported product from its Italian factory, with the goal of supporting U.S. manufacturing whenever possible.

The Dal-Tile brand goes to market via a network of 250 company-owned service centers that feature design centers and galleries. In addition, Dal-Tile has an extensive network of floorcovering and tile dealers across the country. American Olean primarily goes through independent distribution. It also has a select number of service centers, mainly on the West Coast with a few on the East Coast. Marazzi also has a few company-owned showrooms on the West Coast and in the south central area of the U.S. (Texas and Oklahoma) but primarily goes to market via independent distribution. Marazzi sells to the home centers as well, though with a different product offering.

All of Daltile and American Olean’s U.S. and Monterrey, Mexico manufacturing facilities are Green Squared certified. The company is hoping to complete certification for the Marazzi facilities this year.

Commercial business accounts for a large portion of Daltile and American Olean sales. Marazzi has products that are applicable in both the residential and commercial markets.

Last year Crossville introduced its Hydrotect coating, which gives the porcelain tile to which it’s fired antimicrobial, self-cleaning and air-purifying properties. The coating can be applied to nearly all the products that Crossville manufactures. In addition, the company worked to educate the contractor community about proper installation of its large format, thin porcelain Laminam by Crossville product, holding dozens of installation workshops across the U.S.

Crossville recently introduced a new collection engineered specifically for outdoor use called Garden. Garden has technical advantages for outdoor use such as a high DCOF (dynamic friction co-efficient) and resistance to temperature shifts. Its look and colors are designed to replicate stones commonly used in landscape design.

Crossville, the first company to achieve Green Squared certification, manufacturers the bulk of its product line in Crossville, Tennessee. It sources select products such as glass mosaics and some trim pieces. The company manufactures porcelain body tile, which it sells through traditional distribution to the commercial market.

This year, Florida Tile is celebrating its 60th year in business. The company, part of the Italian Panariagroup, manufactures 95% of its product line in Lawrenceburg, Kentucky. The remaining 5% is imported from other Panariagroup factories, three of which are in Italy and two of which are in Portugal. Florida Tile has 300 distributor locations across the U.S. and Canada and 20 company-owned branches. The company opened a Dallas, Texas branch in March and plans to open another in Boise, Idaho in late spring or early summer.

Florida Tile is a Green Squared certified company. All its porcelain products are tested for freeze/thaw and can be used on exterior wall surfaces. It also has products that can be used in exterior horizontal applications because of surface texture. In fact, the company has several lines that are available with both smooth and textured surfaces, so that users can extend a look from indoors (smooth texture) to outdoors (textured surface) to create a cohesive visual, which is popular in design today.

StonePeak, a GranitiFiandre company, manufactures all of its products for the U.S. market in Crossville, Tennessee. The company produces unglazed porcelain products for the commercial market and glazed products for the residential market. The company runs all its glazed lines with digital technology. StonePeak’s factory is Green Squared certified.

StonePeak has been producing 24”x48” tile and 8”x48” tile for some time and is now offering 6”x36” and 18”x36” product as well.